Crude oil and natural gas are the feedstock used in the production of these bulk chemicals. Naturally, the price of crude oil plays a big role in the growth of the commodity chemicals market. In the past few years, oil prices have increased by over 5x from ~USD 20 in 2020 to ~USD 100 a barrel in 2022, which is affecting the costs and profit margins of chemical companies. The war in Ukraine has thrown the energy and commodity markets in Europe into turmoil. Other regions too have been affected by the war and a global pandemic. These disruptions have increased chemical costs. Even the World Bank has warned about rising inflation and economic slowdown.
The chemical industry in the US is steadily making a recovery since the dawn of 2021. Some commodity chemicals reached pre-pandemic sales levels in the same year. As per the latest report, the total chemical output is said to grow by 2.5% in 2023, with organic chemicals to make a 4.5% growth. Capital expenditure is expected to exceed USD 35 billion, with key industry players looking to expand their production capacities as well as penetrate into new markets. The next few years will see a sharp trend in areas such as sustainability, innovation, digitization, and artificial intelligence. Let’s examine them in detail.
Sustainability and decarbonization will be of focus to most organic bulk chemicals businesses in the years to come. Stakeholders and regulatory boards are already putting pressure on them to commit to ESG compliance, recycling, and resource recovery strategies. They are expected to invest heavily in research and development (R&D) to address greenhouse gas emissions and other solutions that can reduce their carbon footprint.
The European chemical industry has pledged to achieve carbon neutrality by the year 2050 as part of the Green Deal, set forth by the members of the European Union. Along with transitioning to renewables from fossil fuels, industry players are turning their focus on new and innovative technologies such as carbon capture and utilization (CCU), electrification of steam cracking, chemical recycling, green hydrogen, and carbon capture and storage (CCS). In a recent survey, more than 85% of chemical industry representatives said they were willing to embed resource and energy efficiency into the production of chemicals. Companies on the other end, are focusing on developing bio-based platform chemicals, in order to stick to their imperatives of green chemistry.
Digital transformation will help chemical plants optimize organic bulk chemicals production, reduce waste, increase safety and sustainability, and become agile to quickly respond to supply and demand fluctuations. Over the next few years, the Industrial Internet of Things (IIoT), artificial intelligence, and cloud computing will be at the heart of industry 4.0 across the chemical sector.
The internet of things (IoT) will enhance connectivity between various devices to improve the quality of material produced, asset performance, and the safety of employees. AI can generate information that can improve and automate production processes. With AI, companies can detect anomalies, leakages, and contamination and engage in early prevention. Cloud computing and predictive analytics will help in the discovery of new materials and chemical formulations. Extended reality and digital twin technologies will help chemical engineers resolve issues such as workforce shortages and employee training. 3D printing can automate device fabrication and the development of novel materials. Cobots and automated guided vehicles can perform hazardous operations without having to put human lives at risk. Sensors and wireless devices can track the historical performance of manufacturing equipment, based on which AI algorithms can forecast potential failures and decrease machinery downtime. With supply chain analytics, producers can analyze weather patterns and predict events that may cause a delay in the supply chain.
Here is a glimpse of the five key trends in bulk organic chemicals industry (see Figure 2).
Large-scale digitization and network connectivity may result in cyberattacks and significant losses. Therefore, the chemical industry is focusing on blockchain algorithms to secure data and supply chains. Blockchain technology tracks everything from the procurement of raw materials to the production of chemical products. It monitors every single molecule at every step of the supply chain. Keeping tabs on the utilization of the chemicals, blockchain helps in demand planning and eliminates overstocking, rushed orders, and scheduling issues. Smart contracts further provide distributed and autonomous control to ensure safety and quality and reduce errors during testing processes.